The search for a relation between environmental, social, and governance (ESG) criteria and corporate financial performance (CFP) can be traced back to the beginning of the 1970s. Scholars and investors have published more than 2000 empirical studies and several review studies on this relation since then. The largest previous review study analyzes just a fraction of existing primary studies, making findings difficult to generalize. Thus, knowledge on the financial effects of ESG criteria remains fragmented. To overcome this shortcoming, this study extracts all provided primary and secondary data of previous academic review studies. Through doing this, the study combines the findings of about 2200 individual studies. Hence, this study is by far the most exhaustive overview of academic research on this topic and allows for generalizable statements. The results show that the business case for ESG investing is empirically very well founded. Roughly 90% of studies find a nonnegative ESG-CFP relation. More importantly, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time. Promising results are obtained when differentiating for portfolio and nonportfolio studies, regions, and young asset classes for ESG investing such as emerging markets, corporate bonds, and green real estate.
For many decades, there has been a debate about the relation between corporate social/environmental performance (CSP) and corporate financial performance (CFP). Our study presents a review of academic research on this topic by applying a second-order meta-analysis. The data sample combines 25 previous meta-analyses yielding a sample size of one million observations. Our results demonstrate a highly significant, positive, robust, and bilateral CSP-CFP relation. The relation is positive regardless of whether firms focus on ecological or social aspects, though corporate reputation turns out to be a key CSP determinant. We find a particularly strong CSP-CFP relation for operational CFP. Furthermore, we add a new perspective on potential biases resulting from the studies' publishing source: social issues-oriented journals and methodological weaker papers do not distort the positive CSP-CFP relation. Our conclusion is: Based on the extant literature, the business case for being a good firm is undeniable. found a significant, positive, and bidirectional correlation of CSP with CFP. Despite these findings, the authors claim that this relation cannot be generalized across all CSP dimensions and CFP categories, detecting a large variabilityeven after correcting for sampling error and measurement error. Since then, the picture has become even more ambiguous and critical debates have resurfaced about the actual CSP-CFP relation (one hand, many scholars claim that, to date, the literature on the CSP-CFP relation remains inconclusive. On the other hand, a whole range of new studies and further meta-analyses have been published supporting a positive relation. Thus, more than a decade after Orlitzky et al. (2003), it seems to be the right time to revive the paper's spirit and ask: when generalizing existing research, is there still evidence that it pays off to be a good firm?To answer this question, we apply a second-order meta-analysis. In other scientific disciplines like medicine, psychology, or education (i.e. research areas typically also experiencing vast amounts of data and conflicting results), meta-analytic techniques are widespread and have been applied since the 1960s (Glass, 1976;Hedges & Olkin, 1985;Hunter, Schmidt, & Jackson, 1982). With the growing number of meta-analyses, the idea of cumulative meta-analysis also appeared (Kazrin, Durac, & Agteros, 1979). Several labels have been used for such analyses: overview of reviews, review of reviews, umbrella reviews, meta-reviews, cumulative meta-analyses, meta-meta-analysis, and second-order meta-analysis (Cooper & Koenka, 2012). However, until recently, no standard procedure with comparable rigour to first-order meta-analytical approaches had emerged. This paper makes use of the novel method for conducting second-order meta-analysis proposed by Schmidt and Oh (2013).We contribute to the academic inquiry on the CSP-CFP relation in several regards. By summarizing the findings of existing meta-analyses and utilizing a data sample that is more than 25 times larger compare...
Investors increasingly commit to consider environmental, social, and governance (ESG) factors in their investment decisions. However, the challenges of investors for a holistic integration of ESG factors in their investment decisions are manifold and endanger reaching urgent societal goals. The paper uses metasynthesis to develop a comprehensive understanding of these impediments from a diverse set of papers. Supported by textual analysis, it identifies 161 different topics, which are subsumed within groups and aggregated along a four-pillar framework of market-, firm-, regulatory-, and individual-based impediments. The most prominent impediments are found in the areas of a perceived lack of a business case, the quality of data, the absence of clear standards and definitions, and various behavioral biases.Moreover, a considerable research-practice gap in framing the relevant research questions that contribute to the slow-moving integration process is discovered.Focusing additionally on potential blind spots on the investor and research sides will prove to be important for swifter ESG integration.
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